Senate weighs DR-CAFTA pros, cons

Senate Agriculture Committee Chairman Saxby Chambliss continues to have reservations about the Dominican Republic-Central America Free Trade Agreement, including concerns that it could “seriously impair” the operations of the U.S. sugar program.

In comments at a committee hearing, Chambliss did not speak directly against DR-CAFTA, which was concluded with five Central American countries in December 2003. (The Dominican Republic joined in March 2004.)

But the Georgia Republican described the upcoming vote on the agreement, expected later this summer, as “perhaps one of the most difficult votes in the 109th Congress,” one that would have repercussions for domestic industries and farmers that cannot be predicted.

“One of my major concerns rests on the fact that the agriculture provisions, specifically those concerning sugar in this instance, can and likely will seriously impair the operations of the sugar program as passed in the 2002 farm bill.”

Previously, Chambliss said he would vote against the agreement when it came to the floor. Opposition from Republican leaders like Chambliss and key House members have caused delays in bringing the agreement to a vote, Washington analysts say.

The day after the Senate Agriculture Committee hearing on June 7, Iowa Sen. Charles Grassley told Congress Daily he thought he might have the votes to pass DR-CAFTA.

“Bringing it to a vote is about the only way I know to find out if you have the votes from some people you can’t get nailed down,” said Grassley, chairman of the Senate Finance Committee and a leading proponent of DR-CAFTA.

A spokesman for the American Sugar Alliance told the Senate Ag Committee hearing that DR-CAFTA would send efficient U.S. producers to the “back of the line” for access to the U.S. market.

“The United States is the only sugar-producing country that is trading away its domestic market through trade agreements like NAFTA and CAFTA,” said Jack Roney, a Sugar Alliance economist. “Nearly 200 trade agreements have been negotiated, but only the United States has ever included sugar import mandates in such agreements.”

Roney said DR-CAFTA is a “fully genuine, life-or-death issue” for U.S. sugar producers. “It really is a shame that other countries protect their sugar farmers, while we seem determined to trade ours away,” he noted. “These trade agreements are like death by 1,000 cuts to America’s sugar farmers.”

American Farm Bureau President Bob Stallman countered that any additional sugar imports from the DR-CAFTA countries — Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua — would have minimal impact on the U.S. sugar industry.

“Any sugar that the CAFTA-DR countries would export to the United States above their new sugar quotas will be subject to a high tariff,” he said, adding Farm Bureau expects the agreement will have an $80.5 million impact on the $2.1 billion domestic industry.”

Overall, Stallman said, Farm Bureau estimates that DR-CAFTA would help increase U.S. agricultural exports by about $1.5 billion by the end of the full implementation of the agreement.

Without the agreement’s passage, “U.S. agriculture will continue to face applied tariffs of between 15 and 43 percent,” he said. “CAFTA-DR will eliminate these barriers. This agreement provides balance by giving U.S. agriculture the same duty-free access that CAFTA-DR nations already have to our markets.”

A National Farmers Union representative, meanwhile, told the hearing that the failure of previous trade agreements to match the promises of free trade proponents has made farmers and ranchers skeptical of DR-CAFTA.

“CAFTA is yet another empty promise that continues the failed trade policies of the past,” said Tom Buis, the NFU’s vice president of government relations. “Estimates of sizable trade gains are overly optimistic. The CAFTA countries have a combined population of 40 million people with limited resources for purchasing products.”

Not only does CAFTA encourage a “race to the bottom for producer prices, it ignores major issues that distort fair trade such as labor, environmental regulations and currency,” he noted. “The costs of complying with labor and environmental standards are a major component of U.S. agriculture.

“Forcing U.S. farmers to compete with farmers from nations which do not have these same high standards gives those producers a competitive advantage.”

Some of the sharpest criticism came from the executive director of the American Manufacturing Trade Action Coalition, an organization that has filed a number of safeguard provisions against Chinese textile and apparel imports.

Auggie Tantillo said DR-CAFTA will exacerbate the $617 billion U.S. trade deficit and displace production and employment in the U.S. textile and apparel industry by encouraging U.S. firms to move to Central America and the Dominican Republic.

“CAFTA replicates the flawed trade policy model of the North American Free Trade Agreement,” said Tantillo. “This model involves granting free access to the U.S. market for producers that use pennies-an-hour wages, low labor standards and low environmental standards to undercut U.S. domestic manufacturers.”

He said CAFTA also destroys the existing incentives that have driven the system where large amounts of American yarn, fabric and components are used in the production of apparel in CAFTA countries.

The Caribbean Basin Initiative requires countries in the region to use U.S. yarn, fabric and components for apparel from those countries to be imported into the U.S. tax-free. “However, CAFTA eliminates the U.S.-only requirement and allows for American or Central American yarn, fabric and components to be used in such garments.

“In addition to changing the rule of origin, CAFTA also contains numerous loopholes that will benefit countries that were not party to the negotiation, such as China,” he said.

Although other groups such as the National Textile Organization and the National Cotton Council were opposed or neutral on DR-CAFTA initially, the latter has now endorsed the agreement.

NCC officials say the Bush administration has addressed many of the issues that it had said needed correcting to produce a “good” DR-CAFTA agreement.

The USA Rice Federation, the American Soybean Association, National Association of Wheat Growers and the National Corn Growers Association all support the passage of DR-CAFTA.